Tax Rules (Tax Categories)

A tax category is a set of tax rules that determines how much tax to charge when a product is sold. Once a product has a tax category, the system automatically works out the tax and the tax-inclusive price as prices are entered, ready for receipts and invoices.

1. Common ways tax is charged

Each tax category falls into one of the following types:

• Taxed: charged normally at a rate, e.g. 21% VAT — the most common case.
• Tax-free (exempt): these items aren’t taxed and aren’t counted toward tax at all.
• Zero-rated: the rate is 0%, so nothing is charged, but it still counts as a “taxable item” for tax purposes (common for exported goods).

Tax-free and zero-rated both result in no charge, but they mean different things on a tax return. For how to choose, it’s best to follow local tax rules or check with an accountant.

2. A product can include more than one tax

A tax category can contain one or several taxes:

• VAT: the main tax.
• Surcharge: an extra tax added on top of VAT (used only in some regions, e.g. Spain’s RE), normally used together with VAT.

Each tax is a percentage; the system calculates each one and adds them up.

3. How the system determines a product’s tax

The system looks in this order and uses the first match:

1. Whether the product itself has its own tax category — if so, that is used;
2. If not, whether its category (tag) has a default tax category — if so, that is used;
3. If still not, the store-wide default tax category is used;
4. If none of the above is set — the item is not taxed.

So a tax category can be set on a single product, on a whole group of products at once, or as one store-wide default. The more specific the setting, the higher its priority.

4. Two ways to enter a price: with or without tax

When entering a price, the type of price can be specified:

• Price without tax: the pre-tax price is entered, and the system works out the tax-inclusive price.
• Price with tax: the tax-inclusive price is entered, and the system works back the pre-tax price and the tax amount.

For example, at a 21% rate:

• Entering a price without tax of 100 gives tax 21 and a tax-inclusive price of 121;
• Entering a price with tax of 121 gives a pre-tax price of 100 and tax 21.

Either way, the system stores all three: the pre-tax price, the tax-inclusive price, and the tax amount.

5. After a rate changes, do existing prices change?

Existing prices don’t change automatically. So that prices already set aren’t affected, changing a rate leaves existing product prices as they are.

If existing prices should reflect the new rate, “Recalculate” can be used:

• After a tax category’s rate changes, the products using it can be recalculated;
• After a category’s default tax category changes, the products in that category can be recalculated;
• After the store-wide default changes, all products can be recalculated.

(Re-entering a product’s price already uses the latest rate, so no extra step is needed.)

No need to worry about forgetting: after any tax-related change, the system shows a “some prices may need recalculating” reminder; clicking “Recalculate all” brings existing prices up to the latest rates. The reminder clears once a full recalculation completes.

Issued receipts / invoices are unaffected — recalculation only updates current selling prices, never past documents.

6. Store-wide default tax category

Each store can have one default tax category. It serves as a fallback when neither a product nor its category has its own tax category set.

7. When it can’t be deleted

While a tax category is in use, it can’t be deleted, which keeps existing records correct. “In use” means:

• Some products use it directly;
• Some product categories have set it as their default;
• Some products’ current prices were calculated with it.

Once those products or categories use a different tax category, it can be deleted.